Lifetime Earnings, Social Security Benefits, and the Adequacy of Retirement Wealth Accumulation

TitleLifetime Earnings, Social Security Benefits, and the Adequacy of Retirement Wealth Accumulation
Publication TypeJournal Article
Year of Publication2005
AuthorsEngen, EM, Gale, WG, Uccello, CE
JournalSocial Security Bulletin
Volume66
Issue1
Call Numberwp_2004/Engen-etal_2004-10.pdf
KeywordsConsumption and Savings, Social Security
Abstract

This paper provides new evidence on the adequacy of household retirement saving. We depart from much previous research on the adequacy of saving in two key ways. First, our underlying simulation model of optimal wealth accumulation allows for precautionary saving against uncertain future earnings. Second, we employ data on lifetime earnings. Using data from the 1992 Health and Retirement Study, we find that households at the median of the empirical wealth-lifetime earnings distribution are saving as much or more as the underlying model suggests is optimal, and households at the high end of the wealth distribution are saving significantly more than the model indicates. But we also find significant undersaving among the lowest 25 percent of the population. We show that reductions in Social Security benefits could have significant deleterious effects on the adequacy of saving, especially among low-income households. We also show that, controlling for lifetime earnings, households with high current earnings tend to save far more adequately than other households.

Notes

Revision of CRR Working Paper 2004-10

URLhttp://www.bc.edu/centers/crr/wp_2004-10.shtml
Endnote Keywords

Social Security expectations/Retirement Saving

Endnote ID

12472

Citation Key6994